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Deals That Don't Stick

It's not possible to call this a trend, but we have noticed that several escrows have flopped recently in MB.

Let's put this first: Every real estate deal, no matter how clean it seems, includes the seeds of its own destruction. Sometimes, it's a wonder that a sale closes.

The most recent escrows in MB to fail and see a property come back to market were:

537 5th (4br/3ba, 2750 sq. ft.), a South End walkstreet home, and what could be better? That's what everyone wants. There's a bidding war going on just up the same street for mere dirt (off-market).

Sure, this house at 537 is an unusual 3-level remodel with, officially, a strikingly small lot (2019 sq. ft. instead of the standard 2700), but everyone who sees it can appreciate the pros and cons of the home.

The point here is that someone made the leap, wrote the offer (on a list price of $2.649M) and, later, had to drop out.

23 Fairway Drive (3br/3ba, 2045 sq. ft.) is a Manhattan Village TH with some remodeling from the 1980s original.

Listed at $1.499M originally, they made a fairly quick deal, but had to come back last week when the buyer quit. It's now at $1.475M.

Two more in the Village that posted deals, but came back recently, were 22 Chatham (4br/3ba, 2950 sq. ft.) (pictured) and 5 Malaga Place (3br/3ba, 2065 sq. ft., now at $1.425M).

22 Chatham began at $2.365M (rich!) and made a deal after cutting to the current price ($2.185M). It happened to go into escrow one week after a Village SFR comp, 13 Bridgeport (3br/2ba, 3300 sq. ft.) closed for $2.200M. But it's back now.

The deal at 5 Malaga stuck for only 6 days in mid-July, so it's been back a month looking for a new buyer.

We're also looking at the 2006 Mediterranean at 1601 Ruhland (5br/5ba, 4100 sq. ft.), which posted a deal less than a week ago when the list price was $2.350M.

It came back to market Monday with a modest cut to $2.290M.

UPDATE: After this post first went up, the escrow was canceled at the new construction project at 1416 3rd (5br/5ba, 4750 sq. ft.), now back listed at $3.199M.

Why might an escrow fail?

The buyers feel like they paid too much. Or the appraisers do.

Or the sellers get impatient when problems arise.

Or the buyers find a different place they prefer.

Communication breaks down.

Money doesn't move when it's supposed to.

The inspection finds awful problems.

The tenants pitch a fit.

The lender is slow.

Oh, that's just the start.

Anything that can happen, may well happen.

A fight can erupt over $2,000. Or $200. In a $2M+ transaction.

The biggest battles will usually emerge over a delay in closing of escrow. Buyers, please don't be late.

As Mrs. MBC likes to say, philosophically, "Into every escrow, a little rain must fall."

Sounds serene, but in Manhattan Beach, these are often high stakes. And when you're talking about Home, it's never easy for either party when problems arise.

We won't be revealing too much to share one war story from way-back-when. One flopped escrow we experienced involved both major inspection problems and a principal who was suddenly jailed during the transaction. There was no chance to negotiate. And as it came time to cancel the escrow, documents had to be brought to a court date where, at last, the principal would be present (in public) to consent, in writing, to the cancellation.

Mostly, the reasons why a specific deal fails really can't be discussed or disclosed. At MBC we're not free to dig into or disclose what others are experiencing.

It is worth noting this: We have not directly experienced problems with appraisals, even in this wildly rising market. (Here are the 13 transactions Dave has been involved in so far in 2014.) It has been nearly 2 years since we can recall an appraisal coming in so low as to jeopardize a sale. In that case, though, the buyers just put extra money down and continued.

It would be significant to this market if we started to see appraisal problems. That's one factor that might start cooling off rising prices.